Recession took its toll on small business in Maryland

New report points to greater impact on small companies than large ones

As Maryland continued to weather lean times in post-recession late 2009 and early 2010, the number of small businesses in the state fell by almost 1,000, while large companies bucked a national trend and added 20 more entities, according to a new report from the U.S. Small Business Administration.

Maryland small business

From March 2009 to March 2010, small businesses in Maryland lost numbers and employees faster than larger companies. Nationally, larger businesses fared worse than small ones that year.

March 2010 Maryland U.S.

No. small businesses 105,580 5,717,302

— Change from March 2009 -0.8 percent -0.6 percent

No. large businesses 2,666 17,236

— Change from March 2009 +0.8 percent -1.6 percent

Small-business employees 1,071,700 54,996,700

— Change from March 2009 -1.5 percent -1.0 percent

Large-business employees 1,003,800 56,973,400

— Change from March 2009 -0.9 percent -2.2 percent

— Source: U.S. Small Business Administration Office of Advocacy

Meanwhile, nonemployer businesses, which have no paid employees but have annual receipts of at least $1,000 in most industries, grew by more than 4,000 from March 2009 to March 2010 as more people started their own consulting or other business.

Nonemployer businesses, usually self-employed individuals operating tiny unincorporated businesses, rose by 31 percent in the past decade in Maryland, much faster than other small and large companies grew.

“2010 was a tough year,” said Daraius Irani, director of the Regional Economic Studies Institute’s applied economics and human services group at Towson University. “A lot of one-man shops were starting. Oftentimes, that’s the only way to make a living when times are tough.”

The Great Recession ended in June 2009, as the nation’s gross domestic product started to climb again in the third quarter that year, according to the National Bureau of Economic Research. But many states, including Maryland, continued to experience its effects in late 2009 and early 2010 that included shedding jobs and businesses.

Businesses in Maryland saw their employment numbers drop by about 26,000 from March 2009 to March 2010, smaller than the job loss of 94,000 from March 2008 to March 2009, according to the annual state small-business profile released by the SBA’s Office of Advocacy.

Almost two-thirds of the job losses were among small businesses — those with fewer than 500 employees — which account for about half of the state’s employment. Maryland small businesses losing numbers and employees at greater rates than larger companies differed from the national trend, in which larger businesses fared worse than small ones.

The private sector in Maryland lost some 38,000 jobs from March 2009 to March 2010, according to the U.S. Department of Labor’s Current Employment Statistics, or payroll, survey. The first March-to-March period to gain private jobs since 2007, when the Great Recession began, was from March 2010 to March 2011, according to labor department figures.

The SBA’s and labor department’s jobs data differ, according to Brian Headd, an economist with the SBA’s Office of Advocacy, because the SBA gets its figures from the U.S. Census Bureau’s Business Dynamics Statistics data series, which measures a few factors different from the labor department’s payroll survey.

For instance, the Census Bureau report excludes railroad employees, while the labor department includes those workers, according to their respective websites. The labor department figures also are much more timely, with state figures as recent as December available. The latest figures for the Census Bureau report are for March 2010.

The most popular type of small business in Maryland in 2010 was in professional and technical services, with about 17,000 businesses, according to the SBA report. That was followed by 14,000 construction businesses, 12,500 miscellaneous service companies, 12,000 health care providers and 11,000 retailers.

Sequestration concerns

The federal sequestration issue is still weighing heavily on Maryland’s economy, Irani said. He thinks officials will reach another temporary resolution before federal spending cuts totaling $85 billion during the next seven months are due to start March 1.

“But they aren’t really solving the problem,” Irani said. “They are just kicking the can down the road.”